Verizon, AT&T rule 700MHz auction; Block D fate unsettled

Verizon Wireless and AT&T won big in the Federal Communications Commission's now-concluded 700MHz auction, which raised a grand total of $19.592 billion for the government. Google failed to purchase any spectrum, but is probably not at all upset given that the open access conditions it wanted will apply. Verizon successfully bid on six big regional licenses on the auction's so-called Block C, one of which cost the company over $1.6 billion. This will give Verizon broadband reach across the continental United States and Hawaii.; the cell phone giant's press release says the six big bids it won will reach 298 million Americans, and 102 licenses it bought in smaller markets can potentially cover 171 million.

All told, Verizon and AT&T amassed 84 percent of total winning bids. "We were successful in achieving the spectrum depth we need to continue to grow our business and data revenues, to preserve our reputation as the nation’s most reliable wireless network," Verizon's boasts, "and to continue to lead in data services and help us satisfy the next wave of services and consumer electronics devices."

But the announcement doesn't explain how Verizon plans to comply with the Block C's open access rules, which will require the company to open its network to any applications and devices that consumers choose. And a Goldman Sachs analysis calls Verizon's investment in the auction "expensive" and warns that it "may be risky."

AT&T crows that its purchases will allow the company to cover 200 of the nation's major telco markets. "AT&T will have quality spectrum available for new services covering 95 percent of the U.S. population," its press release declares. AT&T's purchase last fall of Aloha and its 700MHz spectrum holdings won in 2002 and 2003 auctions allowed the telecom to be more selective in its bidding.

The FCC says that 99 bidders besides the big wireless incumbents won 754 licenses—that's almost 70 percent of the 1,090 licenses that entrants could bid for in the contest. FCC Chair Kevin Martin called the data good news for smaller businesses. But one Commissioner has already issued a press release noting that women owned companies won no licenses in this auction, and minority owned firms picked up less than one percent of the available spectrum.

"Appalling," Democrat Jonathan Adelstein called the results. "Here we had an enormous opportunity to open the airwaves to a new generation that reflects the diversity of America, and instead we just made a bad situation worse. This gives whole new meaning to 'white spaces' in the spectrum."

And indeed, Verizon and AT&T dominated the auction. In the Block C range, Verizon bought a Great Lakes license for $1.625 billion and a Mississippi Valley frequency for $1.109 billion. AT&T picked up a Block B Atlanta license for over $248 million. and MetroPCS purchased a Boston-Worcester license for approximately $313 million. Other successful bidders include QUALCOMM and Frontier Wireless (EchoStar), which won 168 licenses in the E block.

Here are the top seven successful bidders, compiled by Goldman Sachs:

Cellco Partnership d/b/a Verizon Wireless: $9,363,160,000

AT&T Mobility Spectrum, LLC: $6,636,658,000

Frontier Wireless: $711,871,000

QUALCOMM: $558,142,000

King Street Wireless (backed by U.S. Cellular): $400,638,000

MetroPCS 700 MHz $313,267,000

Cox Wireless, Inc.: $304,633,000

The fate of Block D

The question remains what to do about Block D—that 10MHz swath of spectrum that came with a large public interest string attached: the winner would have to share the license area with a national public safety broadband service. The goal is to create a vast interoperable communications region for the nation's public safety agencies (fire, police, and medical). As Ars reported earlier, the block failed to attract more than an initial $472 million bid—far short of the $1.3 billion reserve price set up at the auction's outset. Today the FCC announced that it will "delink" Block D from the other blocks. That means the FCC will bide its time, rather than immediately attempt to reauction the spectrum. "We find it is in the public interest to provide additional time to consider all options with respect to the D Block spectrum," the agency declared.

The Commission's Democrats have already issued public statements on the matter. Adelstein branded the Block D auction failure "nothing short of a tragedy" and called for the agency to coordinate with Congress on the shortfall. "I am hopeful we can build on the tragic lessons of the last auction to make it work for public safety in the next," Adelstein concluded. Commissioner Michael Copps also used a T-word in his press release:"It is a travesty that our nation has failed, so far, to meet this urgent public safety challenge."

A coalition of media reform groups have asked for an investigation of the Block D auction failure. Public Knowledge and the Media Access Project want the Commission to explore "whether discussions between Morgan O'Brien of Cyren Call and possible Block bidder Frontline Wireless caused Frontline to lose financial backing and scared off other bidders."

It was Frontline's high power presence—former agency chairs Mark Fowler and Reed Hundt have been involved with the company—that helped convince the FCC to move on the public safety reserve concept. But the upstart firm couldn't raise the money to successfully compete in the auction. The FCC's public proceedings database indicates that Cyren Call Communications met with or petitioned the FCC no less than 192 times between 2006 and November of last year, many of those meetings regarding this now concluded auction.

Matthew Lasar / Matt writes for Ars Technica about media/technology history, intellectual property, the FCC, or the Internet in general. He teaches United States history and politics at the University of California at Santa Cruz.